Thursday, February 21, 2019

Unfortunately, my recent essay Let's Face It: The U.S. Constitution Has Failed deeply offended readers whom I had no intent to offend. One reader even decided to stop reading my work, which is extreme in the polite and cordial little world of Of Two Minds, where differences of opinion are expected and welcomed as long as they add to our shared understanding of the great issues of our era.

The key point of offense is my suggestion that the Constitution itself is wanting, when it is obvious to all that it's those who have been entrusted to administer the Constitution who are wanting. My error was in not stipulating this self-evident truth at the outset.

But I also think many readers misunderstood my point, which is that the Constitution was devised as a living document that could be amended as needed. It was not intended as a text that could not be updated as conditions change. This is why the method of amendment is spelled out very precisely.

The founders feared exactly what has come to pass: a government that no longer represents the interests of the citizenry. They did their best in a fractious debate to stipulate safeguards, but it's clear that many of the Founders understood that no document could completely safeguard the Republic against a leadership that sought to undermine the Republic at every turn for personal gain.

It is also constructive to recall Jefferson's observations on the need for dissent to maintain liberty:

When Jefferson said, “God forbid we should ever be 20 years without such a rebellion,” he was expressing the idea that “liberties are ensured by the spirit of resistance” and that all great nations had rebellions (again justifying that liberty shouldn’t be sacrificed by conservative worry). (source)

It seems to me that adding strict limits to the government's powers and closing the loopholes that now threaten the Republic are forms of dissent that deserve an open airing. I offer these proposed amendments as a start. I consider them common-sense ways to limit the abuses of power and rank corruption that are undermining the Republic. The penalties have to be severe enough to thwart all who seek to exploit the government's many powers for their private enrichment and gain.

1. No branch of the government may create an agency or entity, public or private, that is not expressly authorized and defined by the Constitution.

No more Federal Reserve, CIA, etc. unless the authorization is added to the Constitution.

2. No agency or entity, public or private, may issue United States currency, or substitute forms of currency, other than the Treasury.

No more Federal Reserve or Federal Reserve notes.

3. The Treasury is authorized to issue loans of one year or less duration to public and private entities in response to financial crisis.

Resolving liquidity crises is the sole justifiable function of central banks. This amendment gives those powers to the Treasury, so there's no need for a central bank.

4. No government may restrict the citizens' enjoyment of the civil liberties defined in the Bill of Rights on all public and private land, with the sole exception being activities that restrict or disrupt the normal flow of commerce.

No more "free speech zones" situated 5 miles from the political hack giving a hackneyed speech.

5. No personnel, paid or unpaid, of the government, government contractors or entities receiving direct or indirect funding from the government may set foot on any foreign soil for the purposes of hostilities or actions preparing for hostilities except as authorized by a Declaration of War by Congress.

No more "wars of choice" or Imperial meddling / over-reach. You want military or mercenary operations in 20 countries? Then get 20 Declarations of War from Congress.

6. No person or entity, living, robotic or digital, may contribute more than one day's pay of the average American laborer to any person seeking elected office in any one election cycle, in currency, goods, services or labor, paid or unpaid. Any person seeking elected office who accepts more than this sum in any form, and anyone who seeks to circumvent this statuary limit on campaign contributions, shall be barred from holding office for their lifetime and will serve a minimum prison sentence of 5 years.

This is about $100 in today's money.

6A. No person or entity which has received funding, favors or contracts from the government, directly or indirectly, within the previous 5 years is allowed to contribute to any elective office campaign, under the penalties described in Amendment 6. Additionally, any entity that seeks to bypass this restriction shall be fined 5 years of annual revenues, payable upon conviction.

6B. Every contribution, direct or indirect, in currency, goods, services or labor, paid or unpaid, made to a person seeking elected office, must be published publicly within 48 hours of receipt. Every entity's contribution must carry the name of the person or persons responsible for the entity's management. Any entity that seeks to bypass this restriction shall be fined 5 years of annual revenues, payable upon conviction.

A corporation with annual revenues of $1 billion would pay a $5 billion fine, or be liquidated. Its shareholders and bondholders would be wiped out.

6C. No individual may spend more than one month of the average laborer's monthly pay on their own campaign for elective office. Anyone who seeks to circumvent this statuary limit on campaign contributions shall be barred from holding office for their lifetime and will serve a minimum prison sentence of 5 years.

This is about $4,500 in today's money.

7. The civil rights of citizens cannot be extended to legal entities, and are reserved solely for living individual citizens.

8. No government employee may accept a position in any private entity that has accepted funding, favors or contracts from the government in the previous 5 years for a period of 10 years after leaving government office.

No more revolving doors, no more corporate capture, no more campaign contributions beyond trivial sums. Campaigns of volunteers will face off against each other.

9. Every agency and office of the government, and every entity or person that has received funding, favors or contracts, directly or indirectly, from the government, shall be independently audited every 4 years, and the results of these forensic audits are to be made public on the day of their issuance. Any entity that seeks to bypass or evade this requirement shall be fined 5 years of revenues, payable upon conviction. Any person who seeks to bypass or evade this requirement shall serve a minimum prison sentence of 5 years.

No more unaudited agencies and government contractors.

10. The government is restricted solely to the powers explicitly stipulated in the Constitution. No additional powers may be assumed unless authorized by an amendment to the Constitution.

This won't stop all mischief, but it at least provides a constitutional barrier and a bulwark of dissent to governmental over-reach.

These are my suggested loophole-closing amendments. You undoubtedly have others and / or improved versions of these. Let's put them on the table for debate and discussion.

Wednesday, February 20, 2019

The cold truth is homelessness and soaring rents are the only possible outputs of central bank policies that inflate asset bubbles.

It's been a long, strange economic boom since the nadir of the Global Financial Meltdown in 2009. A 10-year long boom that saw the S&P 500 rise from 666 in early 2009 to 2,780 and GDP rise by 43% has been slightly more uneven for most participants.

First and most importantly, household income hasn't risen by the same percentages as assets, GDP or costs of big-ticket expenses such as rent, healthcare and college tuition. The broadest measure of income, median household income, has registered a 23% increase in the past decade, roughly half of GDP gains and a mere fraction of stock market and housing gains.

The bottom quintile (20%) registered income gains of 20% from 2009 to 2017, while the middle quintile (roughly speaking, the middle class) gained 25.5% and the top 5% enjoyed a 31.6% gain.

The raw numbers tell the story in a slightly more visceral fashion:

Upper limit of bottom quintile: $24,638 up 20% since 2009

Upper limit of middle quintile: $77,552 up 25.5% since 2009

Lower limit of top 5%: $237,034 up 31.6% since 2009(the median household income is much higher--around $350,000 according to Household Income Quintiles the Tax Policy Center.)

So the top 5% earn at a minimum 10 times the lowest quintile income and around 4 or 5 times the middle quintile income.

Here in Northern California, this has manifested in rapidly expanding homeless encampments a stone's throw away from new luxury rental apartments charging $3,000 and up for one-bedroom flats and $4,000 and up for two-bedroom flats.

Meanwhile, the streets are filled with potholes and cracks. Maintaining streets--presumably one of the core missions of local government--is simply not being done in a timely manner. Major streets are in such disrepair that local businesses have taken to raising banners demanding "pave our street now."

Let's look at three charts of the long, strange boom from 2009: median household income (up 23%), national rents (up 31%) and rent in the San Francisco Bay Area (up 52.4%). Rents are double the gains in median household income in many cities.

The tens of thousands of pricey rentals being built in the region assume an endless expansion of well-paid techie jobs filled by young techies who are happy to sacrifice all hope of ever owning a home in the region ($900,000 for a 100-year old bungalow on a 5,000 square foot lot) or having a family unless they cash in on an IPO or marry a techie who already cashed in.

Sadly, the affordable housing fees collected by cities (up to $10 million per project) are not enough to address the unprecedented need for affordable housing and low-cost housing solutions for the homeless and near-homeless.

What's behind the soaring cost of housing? It's really pretty simple: the extended near-zero interest rates and unlimited liquidity pushed by the Federal Reserve as the "solution" for recession have impoverished the bottom 80% and put ownership of capital out of reach for all but the top 5%.

Though the mainstream media punditry and the political class will deny this, the cold truth is homelessness and soaring rents are the only possible outputs of central bank policies that inflate asset bubbles that inevitably outpace the wages needed to pay the soaring cost of rent and housing.

Tuesday, February 19, 2019

Elections provide the bread-and-circuses staged drama that is passed off as democracy.

Despite the anything-goes quality of American culture, one thing remains verboten to say publicly: the U.S. Constitution has failed. The reason why this painfully obvious fact cannot be discussed publicly is that it gives the lie to the legitimacy of the entire status quo.

The Constitution was intended to limit 1) the power of government over the citizenry 2) the power of each branch of government and 3) the power of political/financial elites over the government and the citizenry, as the Founders recognized the intrinsic risks of an all-powerful state, an all-powerful state dominated by one branch of government and the risks of a financial elite corrupting the state to serve their interests above those of the citizenry.

The Constitution has failed to place limits on the power of government, on the emergence of unaccountable states-within-a-state agencies and on the political power of financial elites.

How has the Constitution failed? It has failed in three ways:

1. Corporations and the super-wealthy elite control the machinery of governance. The public interest is not represented except as interpreted / filtered through corporate/elite interests.

2. The nation's central bank, the Federal Reserve, has the power to debauch the nation's currency and reward the wealthy via issuing new currency and buying Treasury bonds in whatever sums it deems necessary at the moment. The Fed is only nominally under the control of the elected government. It is in effect an independent state-within-a-state that dominates the financial well-being of the entire nation.

3. The National Security State--the alphabet agencies of the FBI, CIA, NSA et al.--are an independent state-within-a-state, answerable only to themselves, not to the public or their representatives. Congressional oversight is little more than feeble rubber-stamping of the Imperial Project and whatever the unelected National Security leadership deems worthy of pursuit.

The Constitution's core regulatory element--the balancing of executive, legislative and judicial power--has broken down. The judiciary's independence is as nominal as the legislative branch's control of the central bank and National Security state: the gradual encroachment of corporate and state power is rubber-stamped and declared constitutional.

The secret power of the National Security agencies was declared constitutional early in the Cold war, when unleashing unaccountable and secret agencies was deemed necessary.

The bizarre public-private Federal Reserve was deemed constitutional at its founding in 1913, and the Supreme Court famously declared that corporations have the same rights to free speech (including loudspeakers that cost millions of dollars) as living citizens.

The powers of the Imperial Presidency also continue expanding, regardless of which party is in office or the supposed ideological tropisms of Supreme Court justices.

Every step of this erosion of public representation and the elected government's power is declared fully constitutional, in classic boiled-frog fashion. The frog detects the rising temperature of the water but isn't alarmed as the heat is increased so gradually.

Since the rise of unaccountable states-within-a-state are constitutional, as is the dominance of corporate / private-wealth elites, on what grounds can citizens protest their loss of representation?

Elections provide the bread-and-circuses staged drama that is passed off as democracy. The key goal of the corporate/state media coverage, of course, is to foster the illusion that elections really, really, really matter, when the reality is they don't. The National Security State grinds on, the Federal Reserve grinds on and the dominance of corporate-wealth elites grinds on regardless of who's in office.

Every emergency is met by the ceding of more power to unelected elites in positions to serve their own interests. The Cold War, financial panics, Cold War Redux--every crisis is an excuse to expand the powers of the unaccountable, opaque states-within-a-state.

The media is already gearing up with 24/7 coverage of the 2020 elections. The constant churn of drama-trauma serves to mask the impotence and powerlessness of the citizenry and the unaccountability of the states-within-a-state that rule the nation.

Monday, February 18, 2019

Those who are betting on Central Planning do not understand the essential role of adaptation.

The global economy is in the midst of a grand experiment pitting centralization (Central Planning) against the evolutionary model of adaptive, self-organizing networks. Centralization is the dominant dynamic of the Status Quo everywhere: the economies of China, Japan, Europe and the U.S. are all dominated by Central Planning: central banks, central state agencies, and Deep State / private sector nodes of wealth and power that pull the systemic strings.

Central Planning--the concentration of power and wealth in the hands of the few--is presented as the "solution": in China, the "solution" is a Total Information Awareness Social Credit Score system of centralized control of the populace. In the U.S., Medicare for all-- the PR term for centralized cartel-state profiteering on a vast scale--is just one of many Central Planning "solutions" being touted by the "Progressives."

Geopolitically, American "Progressives" and neoconservatives alike are enamored of the centralized Imperial Project as the go-to "solution" to any and every challenge.

That which is rigid and inflexible cannot adapt to rapid change, and thus it fails to adapt and vanishes from the Earth. That is the essence of evolutionary dynamics.

Central Planning is a monoculture that incentivizes self-serving corruption and propaganda. Central Planning is by its very nature opaque, as transparency is its mortal enemy. Propaganda is necessary to mask the true nature of the self-serving elites who benefit from central Planning, as their primary task is to convince the commoner sheep being sheared that being sheared is the best of all possible worlds--and that dissenting sheep will be led off to slaughter.

The essence of Central Planning is coercion: skepticism and dissent are dangerous and thus must be suppressed; everyone must consent to the control of elites and agree with the rigid ideology that provides cover for Central Planning's blatant inequality, as the few insiders reap the benefits at the expense of the many--the classic definition of systemic corruption.

Central Planning works until it doesn't, and that moment of failure is at hand.Central Planning is in essence a vast machine of mal-investment of irreplaceable capital. Capital--financial, human and social--that's squandered on unproductive graft, embezzlement, bridges to nowhere, Imperial misadventures, ghost cities, student loans, grossly overpriced, ineffective medications, monuments to Central Planning, etc. cannot be replaced by creating currency out of thin air, or borrowing it into existence.

Eventually, the fantasy that we can replace capital that has been lost to mal-investment with freshly printed/borrowed capital dies: borrowing from our future eventually runs out of rope when the future arrives and can no longer sustain the fast-accumulating mountain of debt.

Central Planning strips out the all the core dynamics of adaptation as dangers:dissent, experimentation, decentralization of power and capital, and a diversity of competing narratives. These are all mortal threats to Central Planning, which is by its nature rigidly hierarchical.

Whether we acknowledge it or not, the world is placing its bets on which system will survive the coming era of destabilizing non-linear change:inflexible, opaque Central Planning or flexible, self-organizing networks of decentralized autonomy and capital.

Those who are betting on Central Planning do not understand the essential role of adaptation: what cannot adapt will die, and Central Planning is by its very nature incapable of true adaptation. Central Planning exists in a self-defining world in which shuffling the facades of PR passes for adaptation: nothing actually changes structurally, the rigid power hierarchy remains untouched.

Adaptation can't be faked. Organizations that cannot adapt quickly and efficiently implode. This is a scale-invariant dynamic: the organizational size doesn't matter. Size and scale do not provide magical protection. Households, corporations, governments and empires that fail to adapt will collapse.

There is a real solution: decentralize, diversify, open the economy and society to dissent, experimentation and self-organizing networks of peers. Rapid adaptation requires radical decentralization, autonomy, transparency, flexibility and experimentation.

Mark Jeftovic and I discuss these topics and more in our new podcast (YouTube, 43:27).

Sunday, February 17, 2019

The signs are everywhere: credit exhaustion is global, and that means the global growth story is over: revenues and profits are all sliding as lending dries up and defaults pile up.

What is credit exhaustion? Qualified buyers don't want to borrow more, leaving only the unqualified or speculators seeking to save a marginal bet gone bad with one more loan (which will soon be in default).

Lenders are faced with a lose-lose choice: either stop lending to unqualified borrowers and speculators, and lose the loan-origination fees, or issue the loans and take the immense losses when the punters and gamblers default.

Europe is awash in credit exhaustion, and so is China. China's situation is unique, as credit expansion has been propping up the entire economy, from household wealth to corporate speculation to the export sector.

At the same time, China's once-mighty pool of savings has diminished as consumption has risen. As a result, China now needs foreign investment more than it did in the previous era.

Chinese businesses have borrowed around $2 trillion in US dollar-denominated debt, requiring the acquisition of dollars to service the debt.

So far this sounds like a typical case of a fast-growth economy maturing into a trade-deficit, debt-dependent consumption economy.

What the article misses is the staggering rise in the cost of living in China over the past two decades. Some services are still affordable to the masses--subway fares are extremely cheap--and private healthcare is a mere fraction of healthcare costs in the U.S.

But other costs--housing, food, clothing, etc.--have shot up to the point that our on-the-ground correspondents report that many living expenses aren't much different than in the U.S.

Recall that wages for college graduates are around $1,100 per month (7600 RMB), with $1,500 per month (10,000 RMB) being an above-average salary.

While white-collar wages are $13,000 annually, apartments in first and even second tier cities are similar in cost to desirable U.S. cities. Rent for a small flat is $800 USD in Shanghai, more than half the average salary, and typically cost hundreds of thousands of dollars to buy.

As I've noted before, roughly 3/4 of all household wealth in China is tied up in real estate, where it is effectively dead-money, earning no yield and completely illiquid.

Reflecting a broad malaise, China's stock market has dropped by 25% in 2018 while its currency weakened against the USD (by official design, of course).

Echoing Tolstoy, every economy in a credit-fueled boom is happy in a similar way, but every economy in a credit-exhaustion decline is unhappy in its own way. The euro's internal contradictions and the EU's political "irreconcilable differences" are about to manifest in a unique way, and China's credit bubble bursting is about to deflate bubbles in shadow banking, housing, speculation and confidence in China's central planning model.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

Our Privacy Policy:

Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Adsense and Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative)If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.

Our Commission Policy:

Though I earn a small commission on Amazon.com books and gift certificates purchased via links on my site, I receive no fees or compensation for any other non-advertising links or content posted on my site.

Weekly Musings Reports

"What makes you a channel worth paying for? It's actually pretty simple - you possess a clarity of thought that most of us can only dream of, and a perspective that allows you to focus on the truth with laser-like precision." Jim S.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

Contribute via PayPal

Why I gratefully accept donations and why you might want to donate:

A 95-minute movie with 10 minutes of ads and a small popcorn costs $25.
If you enjoyed this site for at least 2 hours this year, and you donate $25, you already received more entertainment than you did from the movie. The other 100+ hours of enjoyment you receive here is FREE.

Subscribers and donors of $50 or more this year will receive exclusive weekly Musings Reports.

You have the immense moral satisfaction of aiding a poor dumb writer who seeks to inform, entertain and amuse you.

Contribute via Dwolla

Dwolla members can now subscribe to the weekly Musings Reports with a one-time
$50 payment; please email me,
as Dwolla does not provide me with your email: